Investment activity in qualified opportunity zones has rebounded as states across the nation relax social distancing and shelter-in-place restrictions put in place to combat the coronavirus pandemic, according to a leading due diligence commercial real estate firm.
Not surprisingly, investments and ongoing projects in qualified opportunity zones — economically distressed communities where new investments are eligible for tax abatements or capital gains deferrals — declined in March as the stock market plummeted.
But this spring, the qualified opportunity zone program became the most active in the commercial real estate market as investors took capital gains from money pulled out of the stock market and funneled it into qualified opportunity zones or qualified opportunity zone funds, according to Dallas-based BBG.
"The ability of Opportunity Zones to bounce back from the impact of a coronavirus-fueled selloff in the financial markets readily attests to the program's viability and growing investor demand for these tax-deferred real-estate investments," said BBG Senior Managing Director C. Grant Griffin.
Opportunity Zones were created by the Tax Cuts and Jobs Acts of 2017. The program gives investors the ability to defer or eliminate federal tax payments on capital gains, which could create billions of dollars in tax breaks for commercial real estate projects across the country. The program, has roughly 8,700 census tracts in designated Opportunity Zones.
Those renewed investments in qualified opportunity zones were facilitated by the IRS which announced earlier this month that it would extend the deadline to invest capital gains in qualified opportunity zone funds because of the pandemic, according to BBG. When the White House issued an emergency declaration last March in response to the spreading pandemic, the Secretary of the Treasury suspended a number of tax deadlines.
The 2017 law that created qualified opportunity zones permits taxpayers to include capital gains from annual gross income if they are invested within 180 days in a qualified opportunity zone fund.
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R. Robin McDonald
Daily Report reporter R. Robin McDonald's journalism career includes stints as a staff writer at The Atlanta Journal-Constitution, The Fort Worth Star-Telegram, The Wichita Eagle, and The Anniston Star and as a trial tracker at CourtTV and CNN. She is the author of two true crime books -- Black Widow: The True Story of the Hilley Poisonings and Secrets Never Lie: The Death of Sara Tokars.
